Consider the two (excess return) index-model regression results for stocks A and B. The risk-free rate over the period was 4%, and the markets average return was 11%. Performance is measured using an index model regression on excess returns.

	Stock A	Stock B
Index model regression estimates	1% + 1.2(rM rf)	2% + 0.8(rM rf)
R-square	0.683	0.49
Residual standard deviation, (e)	12.1%	20.9%
Standard deviation of excess returns	23.4%	28.5%

a. Calculate the following statistics for each stock: (Do not round intermediate calculations. Round your answers to 4 decimal places.)

1. Alpha
2. information ratio
3. sharpe ratio
4. treynor measure

b. Which stock is the best choice under the following circumstances? a or b

1. This is the only risky asset to be held by the investor
2. This stock will be mixed with the rest of the portfolio, currently composed solely of holdings in the market-index fund
3. This is one of many stocks the investor is analyzing to form an actively managed stock portfolio

,